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8/4/2019 Respro Amicus
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No. 10-708
IN THE
upreme eurt ef
FIRST AMERICAN FINANCIAL CORPORATION, SUCCESSOR
IN INTEREST TO FIRST AMERICAN CORPORATION, AND
FIRST AMERICAN TITLE INSURANCE COMPANY,
Petitioners,
V.
DENISE P. EDWARDS, INDIVIDUALLY AND
ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,
Respondent.
On Writ of Certiorari to the
United States Court of Appeals
for the Ninth Circuit
BRIEF OF REAL ESTATE SERVICES
PROVIDERS COUNCIL, INC.
(RESPRO®) AS AMICUS CURIAE
IN SUPPORT OF PETITIONERS
MICHAEL D. LEFFELCONNO R A. SABATINO
FO LEY 8 ~ LA R D N ER LLP
Verex Plaza
150 East Gilman Street
Madison, WI 53703
608.257.5035
JAY N. VARON
Counsel of Record
JENNIFER KEAS
FOLEY 8~ LARDNER LLP
3000 K Street, N.W.
Washington, D.C. 20007
202.672.5300jvaron@foley.com
Counsel for Amicus Curiae
W I L S O N - E P E S P R I N T I N G C o . , IN C . - ( 202 ) 789 -0096 - WASH INGTON , D . C . 20002
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TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES .......................................v
STATEMENT OF INTEREST ....................................1
SUMMARY OF ARGUMENT .....................................2
ARGUMENT ................................................................4
I. PLAINTIFF’S CLAIMED INJURY
SEEKS REDRESS FOR A RIGHT
THAT DOES NOT EXIST IN RESPA’
OR OTHERWISE ..............................................4
A. Plaintiff Attempts To Ground HerClaimed Injury And Theories In
RESPA .................................~ .................. 4
B. ABAs Are Accepted And Have A
Long History Under RESPA ..................6
1. ABAs are just another form
of "vertical integration"
that enable new entry into
real estate service markets .........6
2. ABAs provide consumers
with significant benefits ..............
3. The formation of ABAsoften permits small
companies to raise capital,
add needed business
expertise, and solve
business succe’~sion issues ..........
C. Plaintiffs Claims Are GovernedBy RESPA Section 8 ......... : ................... 10
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ii iii
:I.
TABLE OF CONTENTS--continued
Page
D. RESPA Does Not Give Consumers
A Right To Conflict-Free Referral
Advice ....................................................11
1. Before 1983, RESPA did
not address ABAs ......................13
2. In 1983, Congress provided
that ABAs were exempt
from RESPA Section 8
scrutiny under threeprovisos ......................................14
3. Failure to disclose an ABA
relationshipis not a per se
RESPA violation ........................14
E. The Particular Violation Alleged
Here--That First American
Overpaid For Its Interest In The
Agency--Is Not The Kind Of
Thing That RESPA Was DesignedTo Address ............................................16
PLAINTIFF LACKS ARTICLE III
STANDING .....................................................17
A. Plaintiff Alleges No Pecuniary
Injury ....................................................20
B. Plaintiff Cannot Claim Standing
On Any Asserted RESPA
Requirement For An Impartial
Referral .................................................22 "
TABLE OF CONTENTS--continued
Page
C. Plaintiffs Assertion Of A Breach
Of Duty Of Loyalty Under RESPA
Does Not Create Standing ...................25
III. RESTRICTING PRIVATE DAMAGE
RECOVERIES TO SITUATIONS
WHERE INJURY IS ACTUALLY
ALLEGED AND CAN BE PROVEN
WILL NOT CUT OFF LEGITIMATE
RESPA CLAIMS .............................................27
CONCLUSION ..........................................................30
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TABLE OF AUTHORITIES
Page(s)
CASESAllen v. Wright, 468 U.S. 737 (1984) ................... 17, 21
ASARCO, Inc. v. Kadish, 490 U.S. 605 (1989) .........21
AT&T Mobility LLC v. Concepcion,
131 S. Ct. 1740 (2011) ............................: .............28
Camreta v. Greene, 131 S. Ct. 2020 (2011) ................. 5
Carter v. Welles-Bowen Realty, Inc.,
553 F.3d 979 (6th Cir. 2009) ................................12
City ofBoerne v. Flores, 521 U.S. 507 (1997) ...... 17, 18
Collins v. FMHA-USDA,
105 F.3d 1366 (11th Cir. 2010) ............................24
DaimlerChrysler Corp. v. Cuno,
547 U.S. 332 (2006) ........................................... i.. 17
FEC v. Akins, 524 U.S. 11 (1998) ..............................25
First Fed. Sav.& Loan Ass’n v. Greenwald,
591 F.2d 417 (1st Cir. 1979) ............................29-30
Friends of Earth, Inc. v. Laidlaw EnvtI. Servs.,
Inc., 528 U.S. 167 (2000) ................................ 17, 21Glover v. Standard Fed. Bank,
283 F.3d 953 (8th Cir. 2002). ..............................8-9
Gollust v. Mende ll, 501 U.S. 115 (1991) ....................18
In re Rhone-Poulenc Rorer, Inc.,
51 F.3d 1293 (7th Cir. 1995) ................................28
In re Senior Cottages of Am., LLC,
482 F.3d 997 (8th Cir. 2007) ................................24
Kendall v. Employees Retirement Plan of Avon
Prods., 561 F.3d 112 (2d Cir. 2009) .....................26
Loren v. Blue Cross & Blue Shield of Mich.,
505 F.3d 598 (6th Cir. 2007) ...................: .......26-27
Lujan v. Defenders of Wildlife,504 U.So 555 (1992) ..............................................23
McCuIlough v. Howard Hanna Co.,
No. 1:09cv2858, 2010 WL 1258112
(N.D. Ohio Mar. 26, 2010) ...............................12-13
Minter v. Wells Fargo Bank, N.A.,
No. ~/MN-07-3442, 2011 WL 1675262
(D. Md. May 3, 2011) ............................................15
Pettrey v. Enterprise Title Agency, Inc.,
241 F.R.D. 268 (N.D. Ohio 2006) .........................
15
Public Citizen v. United States Dep’t Justice,
491 U.S. 440 (1989) ..............................................25
Raines v. Byrd, 521 U.S. 811 (1997) ..............17-18, 19
Schuetz v. Banc One Mortgage Corp.,
292 F.3d 1004 (9th Cir. 2002) ..............................29
Summers v. Earth Island Inst.,
555 U.S. 488, 129 S. Ct. 1142 (2009) ....... 17, 18, 23
Valley Forge Christian College v. Ares. United
for Separation of Church & State,454 U.S. 464 (19-82) ..............................................18
Vt. Agency of Natural Res. v. United States ex
rel. Stevens, 529 U.S. 765 (2000) ..........................17
Wal-Mart Stores, Inc. v. Dukes,
131 S. Ct. 2541 (2011) ..........................................27
Warth v. Seldin, 422 U.S. 490(1975) ...................19-21
CONSTITUTIONAL PROVISIONS
U.S. Const. Art. III ................~ .............................passim
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STATUTES
Dodd-Frank Wall Street Reform and Consumer
Protection Act, Pub. L. No. 111-203, 124
Star. 1376, §§ 1011(a), 1012(a)(10),
1002(12)(m), 1061-62 (2010) ................................29
Real Estate Settlement Procedures Act of 1974
(as amended), 12 U.S.C. §.§ 2601-2607
12 U.S.C.
12 U.S.C.
12 u.s.c.
12 U.S.C.12 U.S.C.
12 U.S.C.
12 U.S.C.
12 U.S.C.
12 U.S.C.
12 U.S.C.
12 U.S.C.
12 U.S.C.12 U.S.C.
12 U.S.C.
12 U.S.C.
12 U.S.C.
§ 2601(b)(2) ....................................... 3, 16
§ 2602(7) .................................................6
§ 2602(8) .................................................6
§ 2603 ...................................................24
§ 2604(c) ............................................... 24
§ 2607 ........................................... passim
§ 2607(a) .......................................passim
§ 2607(b) ...........................................3, 10
§ 2607(c) ............................................... 24
§ 2607(c)(1)(B) ................................10, 23
§ 2607(c)(2) ...........................................-i0
§ 2607(c)(4) ............, ...................... passim§ 2607(d)(2) .................................... 15, 28
§ 2607(4)(3) ..........................................15
§ 2607(d)(4) ..........................................29
§ 2607(d)(5) ..........................................28
RULES~ REGULATIONS AND REGULATORY MATERIALS
24 C.F.R. § 3500.14(d) ...............................................11
Amendments to Regulation X, the RESPA
regulation, 59 Fed. Reg. 37,360
(July 21, 1994) ........................................................8
vii
Effect on RESPA on Certain Practices Known
as Controlled Business, 45 Fed. Reg. 49,360
(July 24, 1980) ......................................................13
Fed. R. Civ. P. 23 .......................................................27
HUD’s Regulatory Impact Analysis
accompanying its June 7, 1996 final RESPA
regulation governing affiliated business
arrangements .......................................................10
In re Request for Comment on Proposed
Amendments to the Regulations
Implementing RESPA,
Docket No. FR-5180-P-01, at 30 (June 11,
2008) http://www.ftc.gov/os/2008/06/v080012respa.pdf .....................................~ ............. 8
Statement of Policy 1996-2 Regarding Sham
Controlled Business Arrangements,
61 Fed. Reg. 29,258 (June 7, 1996) ....... ...............22
Statement of Policy 1996-4: Title Insurance
Practices in Florida, 61 Fed. Reg. 49,397
et seq (Sept. 19, 1996) ........: ..................................23
Withdrawal of Prior Notice Regarding RESPA,
47 Fed. Reg. 21,304 (May 18, 1982) .....................13
LEGISLATIVE MATERIALS
H.R. Rep. No. 97-532 (1982) ......................................12
HUD’S Proposed RESPA Rule: Hearing Before
the Subcomm. on Oversight &
Investigations of the H. Comm. on Fin.
Servs., 110th Cong. 138 (2008) ..............................8
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Impact of Regulations Under the Real Estate
Settlement Procedures .Act on Small
Business: Hearing before the H. Comm. on
Small Bus., 103rd Cong. 32 (1993) ......................14
MISCELLANEOUS AUTHORITIES
HOUSING AND URBAN DEVELOPMENT: RESPA
SETTLEMENT AGREEMENTS,
http://portal.hud.gov/hudportal/HUD?src=/p
rogram_offices/housing/ramh/res/resetagr(last visited Aug. 26, 2011) ...................................
29Weston E. Edwards, Competition at the Point
of Sale, 56 Mortg. Banking 129 (Oct. 1995) ........26
STATEMENT OF INTEREST1
Amicus Curiae RESPRO®--the Real Estate
Service Providers Council, Inc.---is a non-profit trade
association comprised of more than 150 members
from all segments of the residential home buying and
financing industry whose common bond is to offer so-
called "one-stop shopping programs" for homebuyers
through alliances, contractual agreements and
arrangements known under the Real Estate
Settlement Procedures Act ("R, ESPA") as "affiliatedbusiness arrangements" or "ABAs." These include
joint ventures, parent-subsidiary relationships,
minority investments in existing providers, strategicalliances and marketing agreements to name a few.
RESPRO is particularly interested in this case
because the investment in another settlement service
provider, like that made by Petitioner here, is a
common course of conduct engaged in by RESPRO
members. Indeed, because such investments and theformation of ABAs are a form of "vertical integration"
that enable new entry into real estate service
markets and increase competition and service levels,
the work of ABAs is often challenged. This is not
unlike in earlier days when large supermarkets,
chain stores, or other new business models had to
defend against unfair and anti-competitively
1 The parties have consented to the filing of this brief in letters
on file with the Clerk. No counsel for a party authored this brief
in whole or in part, and nb party or counsel for a party made a
monetary contribution intended to fund the preparation or
submission of this brief. No person or entity other than amicus,its members, or their counsel made a monetary contribution tothis briefs preparation or submission.
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motivated attacks. The irony here, however, is that
the majority of RESPRO members--which primarily
consists of real estate brokerage firms, title agencies,
escrow companies, home warranty companies, and
mortgage lenders or brokers--are privately owned
and or relatively small businesses. Indeed, the
formation of ABAs often permits small, family owned,
companies to raise capital, add needed business
expertise, and solve business succession issues.
Since 1992, RESPRO has advocated for a legal
and regulatory environment that promotes and does
not unreasonably discriminate against one-stop
shopping programs and ABAs. RESPRO alsoconsistently provides regulatory compliance programs
and publishes guides and articles about RESPA,
ABAs, and relevant industry issues, and regularly
testifies and comments on proposed legislation or
regulations in the consumer finance area. RESPRO
has authored several other amicus briefs on these
issues and some of its members have seen first hand
the frustration of being defendants in putative class
actions where the named plaintiffs after closing have
sent thank you notes and presents to the companiesthey later have been convinced to sue. As such,
RESPRO can provide a valuable perspective to the
underlying issues in this case and the plaintiffs
asserted injury.
SUMMARY OF ARGUMENT
Amicus seeks to make three main points. First,
based on the text of statute and its accompanying
regulatory history, it is clear that Congress did not
define an injury that would confer standing absent aviolation that adversely impacted the plaintiff.
Section 8(a) of RESPA, on which Plaintiff Denise
Edwards seeks to base her only claim, was designed
to protect consumers’ pecuniary interests by
deterring improper "kickbacks or referral fees that
tend to increase unnecessarily the costs of certainsettlement services." 12 U.S.C. § 2601(b)(2); see also
12 U.S.C. § 2607(a). While Plaintiff alleges to the
contrary, investment in title agencies or affiliated
business arrangements ("ABAs") do not improperly
facilitate referral fees or otherwise violate RESPA.
Rather, Congress created an express safe harbor
exemption for ABAs; it did not prohibit them per se in
any way shape or form. Moreover, participating in a
settlement transaction with an ABA, even one whichdoes not meet RESPA’s safe harbor exemption test,
does not necessarily give rise to a pecuniary injury for
the homebuyer .or home seller. ABAs generally
provide consumers with convenience, accountabilityand often lower prices. In any event, they do not
constitute a RESPA violation absent proof of the
elements of a Section 8(a) or 8(b) violation.
Second, Plaintiffs asserted injury does not confer
Article III standing. She has not alleged any
pecuniary injury. She cannot base her claim onstanding on some asserted right to an impartial
referral because RESPA does not create such a right.In fact, RESPA approves of exclusive referrals
(therefore, presumably "partial") in somecircumstances. Nor can she assert standing based on
an alleged breach of a duty of loyalty, because
nothing in Section 8(a) of RESPA gives rise to such a
duty.
Third, Plaintiff should not be permitted to avoid
pleading a traditional injury-in-fact just to increase
the likelihood of obtaining a certified class. .Even
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meritless class actions can create overwhelming
pressure on defendants, particularly when the
statute at issue permits the recovery of treble
damages. The appropriate balance is to permitplaintiffs who can actually allege a traditional injury~
in-fact to pursue their claims. In addition, federal
and state agencies are empowered to, and have,
enforced RESPA. Settlement service practices are
also governed by state laws. Thus, there exists
adequate measures to ensure RESPA’s goal of
avoiding kickbacks or referral fees that unnecessarily
increase settlement costs.
ARGUMENT
I. PLAINTIFF’S CLAIMED INJURY SEEKS
REDRESS FOR A RIGHT THAT DOES NOT
EXIST IN RESPA OR OTHERWISE.
A. Plaintiff Attempts To Ground I-Ier
Claimed Injury And Theories In RESPA.
Pursuant to RESPA Section 8(a), the Plaintiff,
Denise Edwards, alleges that First American
unlawfully paid a "kickback" to numerous title
agencies by purchasing an interest in the agencies for
more than their market value, in expectation of
future referrals. App. 58a (Compl. ¶ 41).2
Plaintiff does not claim that she suffered any
financial or other actual harm, since, as the Court of
Appeals recognized, she does not contend that these
alleged kickbacks increased the cost of her title
2 Citations to the Appendix accompanying the petition for a writ
of certiorari are cited as "App. _" and citations to the Joint
App endix are cited as "J.A. _."
insurance or otherwise affected the quality of services
she received from First American. See, e.g., App. 4a;
App. at 49a (Compl. ¶ 5) (complaining only of
allegedly missing "information about the costs").Nonetheless, t~laintiffs theory is that "RESPA
gives .homebuyer a right to conflict-free referral
advice" (i.e., a statutory right to an impartial referral
for settlement services). Respondent’s Brief in
Opposition (hereafter, "Br. in 0PP.") at 21; see also
App. 19a. As explained below, this theory does not
correspond to any right that exists in RESPA or
otherwise.
Similarly, although it is not alleged in hercomplaint, Plaintiff asserts that the Defendants
breached a "duty of loyalty" that she suggests is
created by RESPA. Br. in Opp. at 21-22. RESPA also
does not create such a duty.
This Court is only addressing question two from
the petition for a writ of certiorari, regarding
Article III standing and not whether there is
statutory standing under RESPA. However, an
understanding of RESPA and ABAs may help to shedlight on the constitutional inadequacy of Plaintiffs
asserted injuries.~ Below, Amicus discuss the
relevant aspects of both.
~ Alternatively, this Court could decline to reach theconstitutional issue if nonconstitutional grounds exists thatcould resolve this case. See, e.g., Camreta v. Greene, 13’1 S. Ct .
2020, 2031 (2011).
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B. ABAs Are Accepted And Have ALong
History Under RESPA.
1. ABAs are just another form of
"vertical integration" that enablenew entry into real estate service
markets.
An ABA essentially exists where one residential
real estate service provider has an ownership
interest, whole or partial, in another residential real
estate service provider, not unlike when an auto
company buys a parts company or a drug company
buys distributors. Specifically, RESPAdefines ABAs
as arrangements in which:
(A) a person who is in a position to refer
business incident to or part of a real estate
settlement service involving a federally
related mortgage loan, or an associate of such
person,4 has either an affiliate relationship
with or a direct or beneficial ownership
interest of more than 1 percent in a provider
of settlement services; and (B) either of suchperson directly or indirectly refers such
business to that provider or affirmativelyinfluences the selection of that provider.
12 U.S.C. § 2602(7)..Thus, ABAs arise when real
estate providers have cross-ownership interests in
other providers and refer or endorse their affiliate(s)
to consumers.
4 The term "associate" is a catchall phrase that includes certain
family members of the referring person, as well as various
business associates. See 12 U.S.C. § 2602(8).
2. ABAs provide consumers with
significant benefits.
For a residential real estate transaction to close -
successfully, many moving parts must come together.Once a real estate broker assists a-consumer in
finding a home, the homebuyer generally requires
mortgage financing and the parties and the lender
typically obtain title insurance to ensure that the
title to the property is clear, and homeowners
insurance to protect the underlying property. And of
course, someone--a title company, escrow company,
or lawyer--must close the transaction and help
transfer the property. If any one of these providers
does not do its job, the transaction will not close.Thus, one critical reason why residential real estate
settlement service providers have formed ABAs is to
coordinate and ensure these services are provided
with the desired level of quality.
From the consumer perspective, ABAs also
provide a one-stop shopping alternative that can
facilitate the closing of the transaction. A consumer
need not hunt down five differ.ent providers. Rather,when talking to. a real estate brokerage firm, the
customer might learn about or even meet a mortgage
lender, independent title agency, title insurer, and/or
escrow company, who have experience working
together. Moreover, because the companies are
affiliated, there is some accountability. Instead of a
title agent and a mortgage lender pointing fingers at
each other when a problem exists that could threaten
a closing, they will work together toward resolution.
Contrary to some charges leveled at ABAs,
economic studies show that in practice theconvenience and accountability of one-stop shopping
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do not cost extra and can actually cost less. See
HUD’S Proposed RESPA Rule: Hearing Before the
Subcomm. on Oversight & Investigations of the H.
Comm. on Fin. Servs., 110th Cong. 138 (2008)(statement of David H. Stevens, then-President of
Affiliated Businesses, Long & Foster Companies, on
behalf of RESPRO) (in 2009, Mr. Stevens
subsequently served as the Department of Housing
and Urban Development ("HUD") Assistant Secretary
and Federal Housing Administration Commissioner).
Indeed, HUD and other regulators have consistently
acknowledged the benefits that ABAs (previously
called "controlled business arrangements" or "CBAs"),
offer to consumers. See, e.g., Amendments to
Regulation X, the RESPA regulation, 59 Fed. Reg.
37,360, 37,361 (July 21, 1994) ("[ABAs] and so-called
’one-stop shopping’ may offer consumers significant
benefits including reducing time, complexity, and
costs associated with settlements").5 Thus, there are
numerous legitimate and pro-competitive
justifications for forming an ABA.~
5 See also In re Request for Comment on Proposed Amendmentsto the Regulations Implementing RESPA, Docket No. FR-5180-
P~01, at 30 (June 11, 2008) http://www.ftc.gov/os/2008/06/
v080012respa.pdf ("Bundling related services can create
efficiencies in-lower the costs of-providing those services, and
discounting the bundle allows consumers to pay less for the
services.").
6 While Plaintiff insinuates that ABAs are simply designed to
facilitate referral payments or kickbacks, and frequently refers
to the First American "scheme" in this case, as if there were
some preconceived attempt to deceive, a RESPA Section 8(a)
claim contains no element of intent. See Glover v. StandardFed. Bank, 283 F.3d 953, 964-65 (Sth Cir. 2002) (rejecting
3. The formation of ABAs often permits
small companies to raise capital, add
needed business expertise, and solve
business succession issues.The great majority of RESPRO’s members are
non-publicly traded companies, and include many
relatively small, family-owned companies struggling
with what has been a very difficult real estate
market. For many of these entities, and countless
others, an ABA business model can provide needed
capital and needed expertise, each of which helps
smaller companies compete in the marketplace and
better finance their businesses. Indeed, as HUD
noted in its Economic Analysis accompanying its
June 7, 1996 final RESPA regulation:
there is some reason to expect that referrals
among affiliated firms may reduce costs to
business and consumers. Businesses may
benefit from lower marketing costs and the
ability to share information on the home
purchase or refinancing among settlement
argument that payments for a referral were automaticallyillegal under RESPA Section 8(a) because "inventive minds
making clever arguments can turn virtually any payment
flowing from a lender to a broker, in connection with the
payment of a mortgage loan, into a purported placement for the
unlawful referral of business;" such an argument would "clash"
with Section 8(c), which expressly permits reasonable payments
for goods and services even when done in connection with a
referral) (emphasis in the original). As the Glover courtrecognized, Section 8(c) exempts from liability payments made
for fair value, regardless of intent or whether those payments
accompany a referral, id. at 964, and also exempts ABAs that
meet its three safe harbor requirements: 12 U.S.C. § 2607(c)(4).
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10 1 1 ~
service provides. In the long run, any.cost
savings should be passed on to consumers in
most cases.7
C. Plaintiffs Claims Are Governed By
RESPA Section 8.
Plaintiffs claim here is that Petitioners violated
Section 8(a) of RESPA which prohibits "any person"
from giving or accepting "any fee, kickback, or thingof value pursuant to any agreement or
understanding, oral or otherwise, that business
incident to or a part of a real estate settlement
service involving a federally related mortgage loan
shall be referred to any person." 12 U.S.C. § 2607(a).Section 8(b) prohibits certain unearned fees. 12
U.S.C. § 2607(b). Together, these are the RESPA
Section 8 prohibitions.
However, RESPA also provides that certain
courses of conduct are exempt from these
prohibitions. "IT]he payment of a fee . . . by a title
company to its duly appointed agent for services
actually performed in the issuance of a policy, of title
Insurance, is, for example, exempt. 12 U.S.C. §
2607(c)(1)(B). Any payment that is reasonably
related to the fair value of a service, good, or facility
furnished also is exempt. Id. at 2607(c)(2). In
addition, RESPA provides a safe harbor exemption
for ABAs under Section 8(c)(4), which provides:
7 HUD’s Regulatory Impact Analysis accompanying its June 7,
1996 final RESPA regulation governing affiliated businessarrangements.
Nothing in this section [i.e., RESPA § 8]
shall be construed as prohibiting . .
affiliated business arrangements so long
as (A) a disclosure is made of theexistence of such an arrangement to the
person being referred . , (B) such
person is not required to use any
particular provider of settlement
services, and (C) the only thing of value
that is received from the arrangement,
other than the payments permitted
under this subsection!, is a return on the
ownership interest or franchiserelationship.
12 U.S.C. § 2607(c)(4).
D. RESPA Does Not Give Consumers A
Right To Conflict-Free Referral Advice.
One assertion made by Plaintiff Edwards in this
case (Br. in Opp. at 21) and often made in other
RESPA cases, is that RESPA was designed to give
consumers an impartial (or "conflict-free") referral for
settlement services. This is plainly untrue. Whenone reviews the provisions of Section 8 discussed
above, it is clear that all that is prohibited is a
payment in exchange for a referral of settlement
services. Referrals themselves are nowhere
proscribed in any case where the referring party does
not receive a "thing of Value.’’s Thus, it is not
s "Thing of value" is broadly defined and not only encompasses
the payment of monies, but also covers the offering of discounts,the provision of free services and goods and so on. See generally24 C.F.R. § 3500.14(d). But it does not include obtaining a
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surprising that referrals of services are lawfully made
to friends, relatives, customers, and entities with
whom long established business relationships exist.
The notion that impartial referrals were desiredapparently comes from a misreading and improper
characterization of Section 8(c)(4) of RESPA as an
outlawing of ABAs unless certain conditions are
satisfied.9 In fact, however, Congres~ did not prohibit
ABAs. Rather, as the plain text of the statute
reveals, it gave ABAs a safe harbor that exempts
participants in ABAs from application of Section 8
under certain conditions (including certain required
disclosures). What Edwards and numerous others
misconstrue is that if a participant in an ABA does
not meet the test for an exemption, there is no
automatic RESPA violation unless the elements of a
violation are proven and no other exemption applies.
See, e.g., McCullough v. Howard Hanna Co., No.
feeling of confidence, satisfaction, or well-being that you havemade a referral to someone whom you think will do a good job,
or who needs the work, or whom is a friend. And nowhere inRESPA is there an obligation to disclose why a referral is madeor a standard that the absolutely best referral (assuming that
could even be defined) must be made.9 Some courts have reached this conclusion by relying on
comments from a House Report submitted in conjunction withthe 1983 amendments to RE SP A. See, e.g., Carter v. Welles-
Bowen Realty, Inc., 553 F.3d 979, 987 (6th Cir. 2009) (citingH.R. Rep. No. 97-532 (1982)). While that Report expressedconcern about a referrer "los[ing] its impartiality," Hr. Rep. No.97-532 at 52 (1982), as noted above, Congress did not banreferrals that are not "impartial" and clearly permitted expressreferrals.
1:09cv2858, 2010 WL 1258112 at *3 (N.D. Ohio Mar.26, 2010) (citing additional cases); cf. infra note 11.
1. Be£ore 1983, RESPA did not address
ABAs.Congress enacted RESPA in 1974. Before 1983,
when Section 8 of RESPA introduced an exemption
for ABAs (then known as controlled businessarrangements or "CBAs"), 12 U.S.C. § 2607(c)(4),
there was no provision expressly prohibiting or
regulating such arrangements. In the summer of
1980, HUD published a Federal Register notice
(labeled an "interpretative rule"), which HUD said
was issued in response to public inquiries about
"controlled business." See Effect on RESPA on
Certain Practices Known as Controlled Business,45 Fed. Reg. 49,360 (July 24, 1980). This notice
stated that a ’"controlled business’ relationship ma y
be a violation of Section 8," but did not really explain
how or when this could occur. Id. (emphasis added).
Two years later, HUD withdrew the 1980
interpretative rule. HUD had received "severe
criticismi’ for failing to address the real question--
"whether, or under what circumstances, a return oncapital invested which did not vary in proportion to
volume or value of business referred" was
impermissible--and for implying that CBAs might be
illegal per se. See 47 Fed. Reg. 21,304, 21,304
(May 18, 1982). HUD replaced its original notice
with one clarifying that ABAs were not per se illegal
but that a problem could be raised if returns of
capital were based on referrals rather than
ownership interests--a concern that Plaintiff has not
raised here. See id.
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14
2. In 1983, Congress provided that ABAs
were exempt from RESPA Section 8
scrutiny under three provisos.
In 1983, Congress passed what is currently the
affiliated business arrangement exemption:
Section 8(c)(4) of RESPA. At the Housing
Subcommittee markup of the bill, a proposal to limit
or prohibit CBAs by permitting them in only a small
percentage of transactions was raised but ultimately
rejected:1°Thus, Congress ultimately passed the
ABA "exemption" but declined to otherwise prohibit
or regulate ABAs. The exemption as enacted, quoted
above, places ABAs beyond Section 8 scrutiny if the
parties satisfy three provisos: (1) make the
appropriate disclosure to the consumer; (2) do not
require use of the ABA; and (3) receive returns based
on ownership interests rather than referrals. See 12
U.S.C. § 2607(c)(4).
3. Failure to disclose an ABA
relationship is not a per se RESPA
violation.
Participants in ABAs who want to take
advantage of the 8(c)(4) exemption should provide the
10 Representative Jerry M. Patterson proposed placing a fifty
percent limitation on arrangements involving title companies,
meaning that a title company participating in a transactioninvolving a CBA for that company would have to obtain fifty
percent of its business from outside referrals. Patterson argued
this restriction would require the entity to demonstrate that it
could compete successfully in the marketplace. See Impact of
Regulations Under the Real Estate Settlement Procedures Act onSmall Business: Hearing before the H. Comm. on Small Bus.,
103rd Cong. 32, at 187-89 (1993).
15
required disclosure describing the arrangement as
HUD~ has specified. However, simply because a
disclosure is not made or not made properly does not
mean that the participant violated Section 8 ofRESPA such that they can be held liable for three
times the value of the settlement service involved in
the alleged violation. 12 U.S.C. § 2607(d)(2). A
plaintiff making such an allegation would still be
required to show that the referring party obtained a
referral fee in exchange for the referral or that an
unearned fee was received in violation of Section 8(b).Claims to the contrary are not consistent with
RESI~A’s plain statutory language11 and do not
support Edwards’s claim that she has sufficient
11 Two courts--Pettrey v. Enterprise Title Agency, Inc., 241
F.R.D. 268 (N.D. Ohio 2006) and Minter v. Wells t~argo Bank,
N.A., No. WMN-07-3442, 2011 WL 1675262, at "10 (D. Md..May 3, 2011), have ignored that Congress created an ABA safe
harbor exemption, not a prohibition, and have seized onlanguage in Section 8(d)(3) of RESPA to conclude that a failure
to comply with all of Section 8(c)(4)’s requirements is an
automatic RESPA violation. Section S(d)(3) in essence provides
that no person should be held to -violate or not to comply withthe ABA safe harbor disclosure component if, even though they
did not provide a disclosure in a particular case, they show that
"such violation was not intentional and resulted from a bona fideerror notwithstanding maintenance of procedures that arereasonably adapted to avoid such error." 12 U.S.C. § 2607(d)(3).
Based on this language, which obviously was intended not to
convert an inadvertent error into an automatic disqualificationfrom the exemption, these courts contend that the ABA safe
harbor provisions are mandatory and failure to adhere to them
are automatic RESPA "violations." Amicus respectfully suggests
¯ that such an interpretation is contrary to the overall statutory
framework of RESPA and is erroneous.
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injury to prosecute a RESPA claim for damages based
on the incorrect premise that she had a right to an
impartial referral or to some referral free of a tainted
market.E. The Partieular Violation Alleged Here--
That First American Overpaid For Its
Interest In The Ageney--Is Not The Kind
Of Thing That RESPA Was Designed To
Address.
As part of her claim Plaintiff asserts that First
American overpaid for its interest in Tower City
Title. Accepting that allegation as true does nothing
to establish Plaintiff’s injury. The theory thatoverpaying for an interest in a title agency somehow
secured future referrals is inherently speculative,
raising a seeming myriad of issues about whether
putative class members were in fact referred within
the meaning of RESPA, and referred in exchange for
that overpayment. However, even assuming that this
could be proven for each putative class member,
regardless of how long ago this "overpayment" was
made, it can not permit consumers to recover
damages if, as is the case here, no separate injury-in-fact was alleged or occurred.
The theory underlying the enactment of RESPA
was that referral fees tended to increase the amount
of settlement service costs. See 12 U.S.C.
§ 2601(b)(2). But here, where there is an allegation of
overpayments made years ago for a minority interest
in a title agency (App. 51a-52a (Compl. ¶ 16)), and
where there is no showing that title costs increased or
that individual consumers were harmed, there can be
17
no private recovery of damages under RESPA and
certainly no Article III standing.
II. PLAINTIFF LACKSARTICLE III
STANDING.
This Court has repeatedly recognized the
important limitation on judicial power reflected in
Article III’s standing requirement. Adopting the viewof the Ninth Circuit in this case would significantly
limit Article III’s force and permit Congress to
undermine the separation-of-powers principle
grounded in it. See Summers v. Earth Island Inst.,
555 U.S. 488, 129 S. Ct. 1142, 1148 (2009); cf. City of
Boerne v. Flores, 521 U.S. 507, 536 (1997).Article III provides that the "judicial Power" of
the United States can be applied only to decide
"Cases" and "Controversies." U.S. Const. Art. III.
This Court has interpreted Article III to require .that:
"A plaintiff must allege personal injury fairlytraceable to the defendant’s allegedly unlawful
conduct and likely to be redressed by the requested
relief." DaimlerChrysler Corp. v. Cuno, 547 U.S. 332,
342 (2006) (quoting Allen v. Wright, 468 U.S. 737, 751
(1984)); see also Friends of Earth, Inc. v. Laidlaw
Envtl. Servs., Inc., 528 U.S. 167, 80-81 (2000).
The central issue in this case is whether Plaintiff
has alleged an "injury-in-fact." That is, "a harm that
is both ’concrete’ and ’actual or imminent, not
conjectural or hypothetical."’ Vt. Agency of Natural
Res. v. United States ex rel. Stevens, 529 U.S. 765,
771 (2000) (quoting Whitmore v. Arkansas, 495 U.S.
149, 155 (1990)). The Constitution does not permit
Congress to simply dispense with Article III’sstanding requirement by adopting a statute. Raines
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v. Byrd, 521 U.S. 811, 820 n.3 (1997) ("It is settled
that Congress cannot erase Article III’s standing
requirements by statutorily granting the right to sue
to a plaintiff who would not otherwise have
standing."); see also Valley Forge Christian College v.
Ares. United for Separation of Church & State, 4 54
U.S. 464, 487 n.24 (1982) ("Neither theAdministrative Procedure Act, nor any other
congressional enactment, can lower the threshold
requirements of standing under Art. III.").
In other words, even when Congress grants a
party the right to sue for relief based on a defendant’s
violation of a federal statute, that is not in itself
sufficient to confer standing. See id.; see also, e.g.,
Gollust v. Mendell, 501 U.S. 115, 125 (1991)
(Securities Exchange Act of 1934 could not be
interpreted to permit party later "divested of any
interest in the outcome of the litigation" to pursue
claim because of "serious constitutional doubt
whether" such a plaintiff "could demonstrate the
standing required by Article III’s case-or-controversy
limitation"). Thus, courts must determine, even
when plaintiffs are pursuing claims under suchstatutes, that Article III’s separate requirements for
showing an injury-in-fact are satisfied. See id.; see
also Summers, 129 S. Ct. at 1149; City of Boerne v.
Flores, 521 U.S. 507, 536 (1997).
Here, the Ninth Circuit held Article III standing
existed based on its conclusion that RESPA created a
cause of action addressing Defendants’ conduct. The
Ninth Circuit summed up its holding this way:
"Because RESPA gives Plaintiff a statutory cause of
action, we hold that Plaintiff has standing to pursue
19
her claims against Defendants." App. 7a;12 see also
id. at 5a ("Because the statutory text does not limit
liability to instances in which a plaintiff is
overcharged, we hold that Plaintiff has established
an injury sufficient to satisfy Article III.").
The Ninth Circuit based this conclusion on amisinterpretation (App. at 4a) of this Court’s decision
in Warth v. Seldin, 422 U.S. 490 (1975), wherein thisCourt stated: "injury required by Art. III may exist
solely by virtue of ’statutes creating legal rights, the
invasion of which creates standing."’ Id. at 500
(quoting Linda R.S.v. Richard D., 410 U.S. 614, 617
n.3 (1973)). However, reading Warth, and this
Court’s other Article III cases, in ~ontext,demonstrates that Congress cannot simply create a
legal right out of whole cloth and thereby create
standing. "Art. III’s requirement remains[, and] the
plaintiff still must allege a distinct and palpable
injury to himself." /~d. at 501; see also Raines, 521
U.S. at 820 n.3. The plaintiff must "allege specific,
concrete facts demonstrating that the challenged
practices harm him." Warth, 422 U.S. at 508
(emphasis provided).Under a proper Article III analysis, it is clear
that Plaintiff lacks standing because she failed to
allege any injury-in-fact. She alleges no pecuniary
injury, no informational injury, and no other form of
12 Amicus are not conceding that Plaintiff has even statutory
standing under RESPA to pursue her claim, but .limits itsdiscussion in this brief to the Article III standing question upon
which this Court granted the petition for a writ of certiorari.
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"distinct and palpable" injury to herself or imminent
threat of such injury. Id. at 501.
A. Plaintiff Alleges No Pecuniary Injury.
It is undisputed that, based on the State of Ohio’sfiled rate regulatory regime, all title insurance
available in Ohio at the time of Plaintiff’s purchase
was offered at the same price. App. 14a (noting that
Plaintiff "admits that the cost of title insurance in
Ohio is regulated so that all insurance providers
charge the same price"); cf. Br. in Opp. at 6 & n.3. As
recognized below, Plaintiff does not allege that "the
charge for title insurance was higher than it would
have been without the [alleged] exclusivity
agreement." App. 4a. "Plaintiff does not and cannot
make this allegation because Ohio law mandates that
all title insurers charge the same price." Id. Plaintiff
also does not allege she received inadequate (or less)
value from First American. In other words, she doesnot allege that she could have received better service
from another title insurer.
Plaintiff, however, asserts that "the absence of an
’overcharge"’ is not the same as "the absence of
economic injury." Br. in Opp. at 22. That may betrue in general, but Plaintiff does not adequately
allege any economic injury.
In opposition to certiorari, Plaintiff claims she
suffered an "economic injury" resulting from
"systemic effects" of "reverse competition" in pricing
of title insurance. Id. This too is inadequate to
confer standing for three reasons.
First, as noted above, Plaintiff does not allege
that she was actually charged and paid a price higher
than she would have if there had not been the alleged
exclusive agreement. App. 4a. The allegation simply
is not in the Complaint.
Second, the suggestion that the Defendants’conduct resulted in the title insurance market in
Ohio having higher prices on a "systemic" basis is
pure conjecture. "Hypothetical assumptions,"
ASARCO, Inc. v. Kadish, 490 U.S. 605, 614 (1989),and unsubstantiated, but "remote possibilities," "that
[plaintiffs] situation might have been better had [the
defendants] acted otherwise," do not suffice toestablish standing. Warth, 422 U.S. at 507.
Finally, standing is also lacking when the alleged
injury is "highly indirect and ’result[ed] from the
independent action[s] of some third part[ies] not
before the court."’ Allen, 468 U.S. at 757 (quoting
Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 42
(1976)). Here, in her opposition to certiorari, Plaintiffstates that it is because the "industry is so
concentrated," not the relationship between First
American and Tower City, that has caused prices to
be set where they are in Ohio. Br. in Opp. at 6 n.4.
In short, unable to assert that she wasovercharged for title insurance, Plaintiff cannot
obtain standing based on unpleaded and belated
hypotheticals and implausible conjecture that, in any
event, is not "fairly traceable to the challenged action
of the defendant[s]." Friends of the Earth, 528 U.S. at
180.
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B. Plaintiff Cannot ClaimStanding On Any
Asserted RESPA Requirement For An
Impartial Referral.
In her opposition to certiorari, Plaintiff assertsthat: "RESPA gives homebuye~r [sic] a right to
conflict-free referral advice (or to timely disclosure of
the conflict in an affiliated business arrangement).
The invasion of that
conferring standing."
incorrect.
statutory right is an injury
Br. in Opp. at 21. That is
a. Plaintiff has acknowledged that exclusive
referral agreements--which could hardly be called
"impartial"--are permitted under RESPA. Reply Br.of Appellant-Petition at 2, Edwards v. First Am.
Corp., No. 08-56536 (9th Cir. Apr. 20, 2009) ("[T]itle
companies may have exclusive relationships with
title insurers" under RESPA.).
As noted above, far from establishing a right to
impartial (or "conflict-free") referrals, Congress did
not ban exclusive referrals in RESPA and HUD has
issued a policy statement about affiliated business
arrangements which makes clear its understandingthat exclusive referrals are permissible. See
Statement of Policy 1996-2 RegardingSham
Controlled Business Arrangements, 61 Fed.Reg.
29,258 (June 7, 1996) (discussing ABAs andheir
referral process). In reviewing guidelines that it
utilizes, HUD cites an example of an exclusive
referral agreement as permissible. Id. p. 29,264
("[U]pon review there appears to -be nothing
impermissible about these [exclusive] referrals of title
business from the title agency to the title insurancecompany.").
23
HUD has also noted that it is permissible for a
title insurance agent to make what are the equivalentof exclusive referrals to title insurance companies
when the agent performs certain defined "core titleservices." Statement of Policy 1996-4: Title
Insurance Practices in Florida, 61 Fed. Reg. 49,397 et
seq. (Sept. 19~ 1996). HUD has interpreted such
conduct to be consistent with RESPA’s provision that
permits the payment of a fee "by a title company to
its duly appointed agent for services actually
performed in the issuance of a policy of title
insurance," 12 U.S.C. § 2607(c)(1)(B). Id.
Thus, Plaintiff cannot base her standingargument on any right to an "impartial" referral.13
b. Likewise, Plaintiff cannot base her Article III
standing argument on her suggestion that she has a
right to a "timely disclosure" of the existence of the
ABA or other factors relating to the referral. Br. in
Opp. at 21.14
~a Similarly, the government argued in its brief on certiorari
that the right to "conflict-free" advice is akin to a proceduralright to a conflict-free judge. U.S. Inv. Br. 12. However, the
denial of a procedural right alone is not sufficient to confer
Article III standing. See Summers, 129 S. Ct. at 1151. The
denial of the procedural right must "impairS" some other
"concrete interestS" that arises to an injury-in-fact in its-own
right. Summers, 129 S. Ct. at 1151; L~jan v. Defenders of
Wildlife, 504 U.S. 555, 573 n.8 (1992).
14 As noted above, in her Complaint, Plaintiff complains about a
failure to disclose "critical information about the cost of titleinsurance" (App. 49a (Compl. ¶ 5)), but it is clear from the
context of the paragraph containing this allegation and her laterfilings that the asserted right to information relates to a
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As noted above, RESPA does not provide a party
the right to know about an ABA arrangement per se.
The disclosure of the relationship is only a defense to
what would otherwise be considered a violation ofSection 8(a). See 12 U.S.C. § 2607(c)(4); see also
supra Part I.D. 2-3. While other, sections of RESPA
affirmatively require disclosure (for example, a right
to receive a HUD-1 settlement statement, 12 U.S.C.
§ 2603, or a good faith estimate, 12 U.S.C. § 2604(c)),
there is no affirmative obligation to disclose an ABA
arrangement and even these other disclosure rights
are not privately enforceable.15
The alleged failure of a defendant to make adisclosure consistent with the ABA exception in
Section 8(c), however, does not by itself create an
injury-in-fact. First, Plaintiff has not alleged how
this type of disclosure affected her transaction. In
fact, she has stated that "disclosure is... irrelevant"
to her claims. J.A. 115. Second, standing should not
hinge on the existence of a defense. The existence of
a valid defense may mean that the plaintiffs claim is
ultimately doomed, but it does not enter into the
standing determination. See, e.g., In re SeniorCottages of Am, LLC, 482 F.3d 997, 1004 (Sth Cir.
2007) ("The existence of a defense to a cause of action
does not deprive the plaintiff of standing.").
Plaintiff also cannot base her claim of standing on
some more general claim of a right to unspecified
disclosure of the allegedly "exclusive (and secret) referral
agreements,"(id.).
15 See, e.g., Collins v. FMHA-USDA, 105 F.3d 1366, 1368 (llth
Cir. 2010).
25
information about the "cost" of title insurance,especially in a state where cost is identical for title
policies of all underwriters. When this Court has
recognized an injury-in-fact relating to a party’s non-receipt of information, it has been when the inability
to obtain the information has caused some otherdistinct injury. In FEC v. Akins, 524 U.S. 11 (1998),
this Court held that the information about thepolitical committee in question would help the voters
(the petitioners) "to evaluate candidates for public
office." Id. at 21. In Public Citizen v. United StatesDepartment of Justice, 491 U.S. 440, 449 (1989), the
plaintiff wanted access to meetings and records of the
American Bar Association relating to the "judicial
selection process" so that it could "monitor its
workings" and more effectively participate in that
process. The Court considered this a "concrete and
particularized" harm because the individual sought
and was denied specific information. Id. at 448-49.
Here, and it bears repeating, Plaintiff has not
alleged that she was requesting any particular
information or, more importantly, how that
information would have altered her settlement in anyway.
Plaintiff’s Assertion Of A Breach Of Duty
Of Loyalty Under RESPA Does Not
Create Standing.
At the certiorari stage, in connection with her
assertion of a right to a disclosure of the ABA status
of Defendants, Plaintiff also suggested that she has
somehow been injured by Defendants’ breach of a
"duty of loyalty" owed to her and that, based on thisbreach, she has been injured by way of deprivation of
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26
"property, contracts, and torts." Br. in Opp. at 21~22.
Not surprisingly, Plaintiff never pled such an injury
in her complaint. Moreover, RESPA does not create
any such duty of loyalty under Section 8(a) that couldform the basis of Plaintiffs now alleged injury-in-fact.
To read into Section 8(a) of RESPA a "duty of
loyalty" would be contrary to its language and intent
and would increase the potential liability of service
providers like Amicus’s members without reason or
authority. Section 8(a) prohibits certain referral fees.
It does not call on settlement service providers to act
as agents for, or establish a fiduciary duty with, their
customers.l~
Even if Section 8(a) did somehow create a duty of
loyalty, there still must be some underlying distinct
injury-in-fact for Plaintiff to have Article III
standing. See, e.g., Kendall v. Employees Retirement
Plan of Avon Prods., 561 F.3d 112, 121 (2d Cir. 2009)
(rejecting argument in ERISA action that
"deprivation of [an] entitlement to [a] fiduciary duty.
constitute an injury-in-fact sufficient for
constitutional standing"); Loren v. Blue Cross & BlueShield of Mich., 505 F.3d 598, 608-09 (6th Cir. 2007)
("Thus, even where statutory standing pursuant to
1~ Nevertheless, most referring parties take their referrals very
seriously because if they are not good referrals, they will get
blamed and the repeat customer they are looking for will not
materialize. Indeed, as one authoritative source noted, this iswhy in order to get a good capture rate in an ABA, you need
great service and great rates, not just an ABA since agents will
be skeptical and afraid to make a bad referral. Weston E.
Edwards, Competition at the Point of Sale, 56 Mortg. Banking129 (Oct. 1995).
27
ERISA is satisfied, the elements of Article III must bemet."). Here, Plaintiff has alleged no such underlying
form of injury.
III. RESTRICTING PRIVATE DAMAGE
RECOVERIES TO SITUATIONS WHERE
INJURY IS ACTUALLY ALLEGED AND CAN
BE PROVEN WILL NOT CUT OFF
LEGITIMATE RESPA CLAIMS.
Amicus is not suggesting that claims under
RESPA based on compensated referrals are never
actionable. In theory a plaintiff could be overcharged
(in some states) or have a basis for a claim about the
level of service he or she received, or some other
concrete and particularized injury traceable to the
defendant’s conduct. To have Article III standing,
however, those types of injuries must be alleged, and
here they were not. Moreover, where the claim is
brought as a class action for damages, they must be
provable with common evidence and facts that
predominate. See Fed. R. Civ. P. 23; see also, e.g.,
Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551
(2011) ("That common contention, moreover, must beof such a nature that it is capable of classwide
resolution--which means that determination of its
truth or falsity will resolve an issue that is central to
the validity of each one of the claims in one stroke.").
Here, Edwards, has not (and apparently, based
on her testimony, cannot allege) any overcharge or
dissatisfaction with the level of service she received.
In short, she is complaining about nothing.
Perhap.s she has chosen to plead her claims in theway she has in order to make it more likely that a
class could be certified, to claim as she does that "all
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28
of the" putative class members were "injured in
precisely the same way." App. at 49a (Compl. ¶ 5).
But Article III does not permit a plaintiff, even
one trying to certify a class action, to avoid pleading
an actual injury-in-fact. This Court has previously
recognized the threat that an unchecked class action
device can pose. Cf. AT&T Mobility LLC v.
Concepcion, 131 S. CA. at 1740, 1752 (2011) ("[W]hen
damages allegedly owed to tens of thousands of
potential claimants are aggregated and decided at
once, the risk of an error will often become
unacceptable."). That is particularly concerning
when the statute at issue, as RESPA does, permitsthe trebling of damages and an award of attorneys’
fees.17 In the words of Judge Friendly, the class
action device alone can at times result in "blackmail
settlements," where even defendants withmeritorious defenses feel compelled to settle based on
the enormous threat of liability a class action can
present. See In re Rhone-Poulenc Rorer, Inc., 51 F.3d
1293, 1298 (7th Cir. 1995) (quoting Henry J.
Friendly, Federal Jurisdiction: A General View 120
(1973)). Expanding the ability to pursue class claimsin federal court by altering the traditional injury-in-
17 For Section 8 violations, RESPA provides:
Any person or persons who violate the prohibitions or
limitations of this section shall be jointly and severally
liable to the person or persons charged for the
settlement service involved in the violation in an
amount equal to three times the amount of any charge
paid for such settlement service.
12 U.S.C. § 2607(d)(2j; see also12 U.S.C. § 2607(d)(5)(permitting the award of costs and attorneys’ fees).
29
fact requirement for plaintiffs will simply make this
practice more prevalent.
Class actions, of course, have a proper andimportant role to play in our judicial process.
However, permitting them (or any litigation in
federal court) to proceed even without the important
limitations of Article III’s standing requirements, is
not what Congress or the framers of our Constitution
envisioned.
That does not mean that violators of RESPA will
escape scrutiny. First, those actually suffering an
injury-in-fact may pursue claims. Second, HUD and
state regulators have been empowered to enforce
RESPA restrictions to prevent violations of RESPA,
and frequently do so. See 12 U.S.C. § 2607(d)(4); see
also, e.g., Schuetz v. Banc One Mortgage Corp., 29 2
F.3d 1004, 1009 (9th Cir. 2002) ("HUD is the
administrative agency charged with enforcing
RESPA."); U.S. DEPARTMENT OF H O U S I N G AND URBAN
DEVELOPMENT: RESPA SETTLEMENT AGREEMENTS,
http://portal.hud.gov/hudportal/HUD?src=/program_o
ffices/housing/ramh/res/resetagr (last visited Aug. 26,2011) (identifying twenty-five RESPA settlement
agreements from 2006 to present). As of July 21,
2011, the Bureau of Consumer Financial Protection,create~l by the Dodd-Frank Act, can enforce RESPA
and has even greater powers to do so. See Dodd-
Frank Wall Street Reform and Consumer Protection
Act, Pub. L. No. 111-203, 124 Stat. 1376, §§ 1011(a),
1012(a)(10), 1002(12)(m), 1061-62 (2010). Third,state laws also regulate settlement services conduct
and are not preempted by RESPA. See, e.g., FirstFed. Sav.& Loan Ass’n v. Greenwald, 591 F.2d 417,
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3O
420 & n.5 (Ist Cir. 1979) (noting that "any state law
with respect to settlement practices" that is not
inconsistent with RESPA is not preempted by it)
(citing 12 U.S.C. § 2616). Thus, there is no need to
allow private enforcement, of RESPA when no
traditional injury-in-fact has been alleged, much less
incurred.
CONCLUSION
For the reasons stated above, the judgment of the
court of appeals should be reversed.
August 29, 2011
M I CHAE L D. L E F F E L
CO N N O R A . S A B A T IN O
F O L E Y & L A R D N E R L L P
Verex Plaza
150 East Gilman Street
Madison, WI 53703
608.257-5035
Respectfully submitted,
J A Y N . V A R O N
Counsel of Record
J E N N I F E R K E A S
F O L E Y & L A R D N E R L L P
3000 K Street, N.W.
Washington, D.C. 20007
202.672.5300
jvaron@foley.com
Counsel for Arnicus Curiae
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